Sports leagues risk biting the hand that feeds them fees

CHICAGO (Reuters) - As the major U.S. sports leagues put more muscle behind their own television networks, they risk biting the hands of the broadcast and cable networks that feed them about $6 billion a year in rights fees.

While executives at top broadcasters do not see an immediate threat to their ratings or ad revenue stream from the channels established over the past decade by the NFL, NBA, NHL and Major League Baseball, they worry about increased game coverage and the impact on the exclusivity of their coverage.

"Leagues and teams have to be cognizant of not jeopardizing the golden goose," said Jon Litner, president of Comcast Corp's (CMCSA.O) family of 10 regional sports networks reaching 40 million U.S. homes. "As they begin to chip away at that exclusivity, at some point the ecosystem comes under stress."

The leagues dismiss such fears, saying their networks are only meant to draw attention to their sports like carnival barkers of old.

"We view NBA TV as complementary to our national network partners," National Basketball Association Deputy Commissioner Adam Silver said. "In fact, we avoid counter programing those networks and in some ways view ourselves as an old-fashioned barker channel."

MLB President Bob DuPuy said the MLB Network does not compete and that should not change for some time. "No one in the industry views our network as direct competition."

To ensure broad distribution of their channel and the largest-ever cable TV launch in January, baseball officials gave one-third of the network to satellite operator DirecTV Group Inc (DTV.O) and cable companies Comcast, Time Warner Cable Inc (TWC.N) and Cox Communications Inc.

The National Football League, which retained 100 percent ownership in its network, has been in disputes with several cable operators over the channel's distribution, although it reached an agreement with Comcast last month.

POTENTIAL RICHES

Most of the broadcasters see no immediate threat and still view sports as a valuable commodity despite an overall decline in ratings as the number of channels on cable rises.

"The lion's share of the revenue from television comes from the broadcast networks and the cable stations and I don't see the leagues sacrificing any significant portion of those rights for their own cable properties," said Sean McManus, president of CBS News and CBS Sports (CBS.N), which airs NFL games.

McManus expects the number of games on the league-owned networks to remain about the same, ranging from the NFL's eight to the NBA's 96.

However, the leagues cannot ignore the potential riches of their channels and some analysts expect them to air more live games and game highlights as they renew deals with broadcast partners down the road.

When the YES Network, the sports channel for baseball's New York Yankees, was put up for sale in 2007 its value was estimated at around $3 billion. While the deal never occurred, analysts said owners saw the potential.

Steve Greenberg, managing director at investment bank Allen & Co, does not see an immediate threat, but the league-owned networks are ultimately rivals for consumer eyeballs and corporate ad dollars. "Every one of these networks is a competitor of ESPN."

Greenberg co-founded Classic Sports network before selling it to ESPN, then helped start a channel dedicated to college sports and is currently advising the U.S. Olympic Committee on the creation of its own network. He also served as baseball's deputy commissioner in the early 1990s.

It is not the best time for a battle over advertising dollars as the U.S. ad industry is in a severe slump with spending expected to decline 4.3 percent this year and 6.5 percent in 2010 according to media agency GroupM.

Ultimately, the risk in competing more directly with the broadcasters and hurting those rights fees may be too great, industry officials said. Better to leave it to the experts.

"At the end of the day, a lot of big companies lease their office space and buildings because they don't want to be in the real estate business," said Randy Vataha, president of sports investment bank Game Plan llc.

The NBA sees it that way as it partnered with Turner Broadcasting to sell ads for NBA TV, but Silver said the league sees potential for something much larger and no one can predict what the media landscape will look like in five years.

In the end, the owners know where their bread is buttered.

"We do pay significant sums of money for those rights and at some point the leagues are simply consortiums of owners and they want to get paid," said John Skipper, head content officer at Walt Disney Co's (DIS.N) ESPN sports unit.

(Reporting by Ben Klayman, editing by Matthew Lewis)